Lithuania

The Baltic States are unique in Europe in that they went through an austerity crash program a while ago already (beginning right after the 2008 crisis) and have in the meantime recovered strongly. Der Spiegel has an interesting interview with Lithuanian president Dalia Grybauskaite, in which she explains her views on the topic. It can obviously be done successfully. And while we are aware that every case is unique - the problems are not the same in every country, and due to cultural norms and traditions, it may be easier to enact reform in certain countries than others; it seems that no matter how many times Paul Krugman insists that no Baltic nation can possibly be held up as an example, the fact remains that they have imposed fiscal austerity and implemented wide-ranging reform measures and have succeeded.

One of the constant and consistent themes found in Europe is the lack of acknowledgement of what is there and not there. It is a pervasive infection that has gripped the Continent as this manner of doing business clouds the reality of what is at hand and pushes consequences out to some date in the future. After the first Greek bailout both the IMF and the EU informed us, in no uncertain terms, that the new measures would bring the debt to GDP ratio of Greece to 120% by 2020; today we hear a new, new number that the debt to GDP ratio for Greece is 190% and that the country will have a primary surplus in the next few years. These statements have all of the truth to them as Lithuania is part of the United States or that penguins can be found in the Amazon. The problem then, in believing this kind of nonsense is also exactly what we are facing now; Greece cannot pay her bills, the PSI card has already been played and someone is going to have to pay the piper and no one wants to pay him. Whatever remains of some coalition between the EU and the IMF is now in tatters as neither entity wants to take the hit. In fact, neither entity can afford the hit without devastating consequences and yet the hit is going to be taken, of that much I can assure you, because there is nothing left to do.

Gazprom has Europe’s natural gas market in a stranglehold and Europe is attempting to fight back, first with a raid last year on the Russian giant’s offices and then with a probe launched earlier this week against its allegedly illicit efforts to control the EU’s natural gas supplies. The bottom line is that the same natural gas revolution in the US, which was enabled by hydraulic fracturing (fracking), is now threatening to loosen Gazprom’s noose on the EU, and Gazprom simply won’t have it. Let’s not pretend that energy companies are clean and that governments aren’t using them to forward nefarious geopolitical objectives (US multinationals in Northern Iraq, for instance). The point is not to paint Gazprom as the ultimate evil in energy. This is about Europe, and the EU’s “Mommy Dearest” struggle with Gazprom, which is undoubtedly playing an underhanded energy-politics game worthy of the most sinister of accolades.

• Ringing endorsement: Lithuania to Adopt Euro When Europe Is Ready, Kubilius Says (Bloomberg)
• Credit Agricole net plunges 67% on losses in Greece and a writedown of its stake in Intesa Sanpaolo SpA (Bloomberg)
• Europe finally starting to smell the coffee: ECB Urging Weaker Basel Liquidity Rule on Crisis Concerns (Bloomberg)
• Japan Cuts Economic Assessment (Reuters)
• France’s Leclerc Stores to Sell Fuel at Cost, Chairman Says (Bloomberg)
• China Eyes Ways to Broaden Yuan’s Use (WSJ)
• Berlin and Paris forge union over crisis (FT)
• Brezhnev Bonds Haunt Putin as Investors Hunt $785 Billion (Bloomberg)
• Republicans showcase Romney as storm clouds convention (Reuters)
• ECB official seeks to ease bond fears (FT)
• German at European Central Bank at Odds With Country’s Policy Makers (NYT)

Tour operators in China do their best to arrange excursions, but it pales in comparison to what could be done. Someone could create tremendous value by facilitating transactions between these potentially buyers and sellers… essentially helping to create a marketplace. This type of business is scalable; it could be done on a small, local level in individual cities and tourist hotspots, or on a much larger, international level.  The demand is there, the door is open. This is just one example… but it goes to show that regardless of how much money they print or how many freedoms they try to take away, there are always great opportunities out there.

It seems every week there are new acronyms or catchy-phrases for Europe's Rescue and Fiscal Progress decisions. Goldman Sachs provides a quick primer on everything from ELA to EFSM and from Two-Pack (not Tupac) to the Four Presidents' Report.

Debate between Krugman and the CFR rages on in round 2 on whether currency devaluation created the Icelandic Miracle or Mirage.  

The battle between the 'Austerians' and the 'Keynesians' remains front-and-center in Europe (and elsewhere for that matter). As Sean Corrigan noted recently Frau Merkel is sticking to the only strategy that she can - of insisting that future aid is tied to the construction of budgetary oversight, reduced national sovereignty, and the implementation of labor market reforms - paying lip-service to her nation's unwillingness to pay for what they view as their counterparts' indolence or improvidence. How long this can last is an open guess. Stratfor's Kristen Cooper provides a succinct clip of the state of European Austerity (seeing little progress in reality and in fact a pull-back by Italy and France at the realization that their electorate won't be happy!!). Perhaps, as Corrigan notes, the real lesson is to be had from the Baltics, where 'drastic devaluation' has accompanied genuine 'austerity' - and as a result of this bitter medicine, they are now growing private GDP. As Corrigan sums up, [Austerity as it is being implemented in Europe] is aimed not so much at reinvigorating individual endeavour as at minimizing the reduction in the reach and importance of the state (satisfying neither the Keynesians nor the Austrians) and that is what is self-defeating about such measures.

One European think tank which has been spot on in its skepticism over the past two years, is OpenEurope. Below they share their views on the next steps for Greece.

No one likes paying taxes. You’d think.

A growing number of Americans are frustrated with the way in which their economy has been managed and are becoming increasingly concerned about future measures the government may take to keep its coffers full. A question that is arising with increasing frequency is: does expatriation offer a viable protection to those concerned about a more financially-intrusive US system? The short answer is 'yes' but while it does offer a solution to ending one's obligations to pay US taxes - it's important to understand that it's not suitable for everyone. Mark Nestmann gives a great nuts and bolts breakdown of what's involved and what the benefits and risks are

A gold standard, abandoned mostly due to a shortfall in the amount of the metal required to back the monetary system? A common bloc designed to simplify trade and commerce? Macro-economic reform of the union from the centre? Voluntary adoption by England who was not part of the union? Ah, well almost. Anyway, my point is this: In the mid-700s it probably seemed inconceivable that Europe would be united under a common ruler, much less a common currency and, by the mid-800s, it probably seemed equally inconceivable that such a union could split asunder - but  such is the nature of unions (and currency blocs for that matter). As the individual members undergo the individual stresses associated with running individual and idiosyncratic economies under a common banner, it is inevitable that there will be periods when maintaining the status quo becomes impossible. It was true of Europe in 800 - it holds true today.

...but if Fitch changing the outlook from positive to stable on Bulgaria, Czech, Lativa, and Lithuania can push us down 0.5% then if you are long, you need to be putting on some sort of a hedge. I'm not a big fan of puts, and maybe this isn't the news that caused the market to go down, but if it is, then that is scary.

Many western politicians have harbored deep suspicions of Russian Prime Minister Vladimir Vladimorovich Putin since he first emerged on the Russian political stage in 1999. This is hardly surprising, given his KGB background, though those with longer historical memories will recall that Yuri Andropov came from the same organization and that the West grudgingly found a way to work with him. While the worst aspects of the Cold War faded away with the peaceful collapse of the USSR in late 1991, twenty years later, trying to figure out Kremlin politics remains as vital an exercise as ever, and the “Putin era” has provided Washington analysts desperately reinventing themselves to hang on to their jobs with rich fodder. Is Putin a democrat? Stalinist? Or something in between? Place your bets.

Cue popular REM song...